The US labor market and key inflation data have been in a back-and-forth cycle over which will ease up first, leading to cooling inflation. To talk more about key economic data, Mizuho US chief economist Steven Ricchiuto sits down with Market Domination to ask the real question: "Is the cooling really real?"
"If we're in a situation where people just aren't getting hired, according to the household survey, that could simply be because we're not finding it hard to find qualified workers in those areas that are covered. Maybe that's not an indication that there really is slack developing in the labor market, that's an indication of a problem within the labor market," Ricchiuto says, citing recent employment growth and the household employment survey data.
Ricchiuto also discusses what the 2024 election results in November could impact the US economy and monetary policy.
For more expert insight and the latest market action, click here to watch this full episode of Market Domination.
I'm interested, even to, um, your thoughts generally on the labor market. Obviously, we've seen signs of cooling there, Stephen, but beyond cooling, are you seeing any signals that concern you, worry you?
I mean, I I I I don't see anything that's worrying. I there has been some cooling, but we have to ask yourself a question, is the cooling really real? And that's that's an unfortunate question we have to ask yourself. When you look at the rise in the unemployment rate, we've seen two things happen. We've seen the participation rate rise and we've seen the household employment numbers really stagnate. Meanwhile, the payroll employment numbers are growing at a very healthy 200 to 225,000 a month pace. Now, eventually the household employment numbers always catch up to the payroll numbers. And when that happens, we could very well be looking at a drop back in the unemployment rate to lower levels, or we could sit at this level for a very long period of time. The other reason why I question whether or not the labor market has really become easy is because the number of people being laid off, whether it's the continuing claims numbers, the unemployment claims numbers or whether it's the unemployed numbers themselves from the payroll employed from the household based survey, people are not getting laid off. And that's what shows you what a labor market is easing up. You know, if we're in a situation where people just aren't getting hired according to the household survey, that could simply be because we're not finding it hard to find qualified workers um, in those areas that are covered. Maybe that's not an indication that there really is slack developing in the labor market. That's indicate indication of a problem within the labor market.
Um, we have been talking a lot with market participants about the upcoming presidential election, the effect it could have on the markets. I'm curious how you're thinking about it and its potential effect on the economy, or are you kind of waiting until we get closer to start to frame that out?
Well, no, I mean, I think what you're looking at for either individual, um, you know, you're looking at additional fiscal stimulus. And the economy is already dealing with a $2 trillion budget deficit. Uh, so we're likely to be dealing with a two and a half to $3 trillion budget deficit. And I'm afraid that kind of budget deficit is going to require higher long-term interest rates. And our risk has been all along that the yield curve eventually steepens from the long end, not that it steepens from the front end the way everyone wants to believe and has been betting all year that it would happen and the reality is long-term rates are today, even today, after this recent rally, still higher than they were when we began the year by almost 50 basis points.
Stephen, great to have you on the show today. Appreciate all that insight.
Cheers.
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This post was written by Luke Carberry Mogan.